What Happened And Why It Will Happen Again

[merrylander]

All this blaming of Obama, would some kind soul tell me under what executive power could he have done all these marvellous things you all are suggesting? Thanks to our marvellous tri-partite form of government I think his hands were effectively tied without co-operation from Congress

[BlueStreak]

Originally Posted by bobabode

1960's loooong time.

LBJ?

Dave

[Boreas]

Originally Posted by merrylander

All this blaming of Obama, would some kind soul tell me under what executive power could he have done all these marvellous things you all are suggesting? Thanks to our marvellous tri-partite form of government I think his hands wre effectively tied without co-operation from Congress

Why, with his pen and his Obamaphone!

Creation of the RTC required an act of Congress. With the climate after President Obama's first inauguration and after the secret Republican strategy meeting at the Caucus Room Restaurant, that wasn't likely to happen. I think it would have been smart to try, though. The public would have been solidly behind a move that was aimed at both reforming the banking system and penalizing the people who gambles away their money.

But the political will just wasn't there.

John

[Dondilion]

Originally Posted by Boreas

I think something like the Resolution Trust Corporation should have been created as it was during the S&L crisis. In that situation, if memory serves, the RTC basically assumed ownership of the troubled S&Ls during their period of restructuring and then, when they were sound again, the RTC turned them loose.

Worked like a charm. Some S&Ls never made it out alive but most did and I think the government made some money on the deal.

John

http://en.wikipedia.org/wiki/Resolut...st_Corporation

[Dondilion]

Originally Posted by Boreas

Why, with his pen and his Obamaphone!

Creation of the RTC required an act of Congress. With the climate after President Obama's first inauguration and after the secret Republican strategy meeting at the Caucus Room Restaurant, that wasn't likely to happen. I think it would have been smart to try, though. The public would have been solidly behind a move that was aimed at both reforming the banking system and penalizing the people who gambles away their money.

But the political will just wasn't there.

John

I highlight the operative word.

[Boreas]

Originally Posted by Dondilion

I highlight the operative word ("try").

Oh, absolutely! It never would have worked but the Obama Administration and the Democratic caucus should have given it a concerted and sincere effort.... and then screamed bloody murder when it failed. They would have had the people behind them and the 2010 mid-term might have turned out a lot differently.

John

[merrylander]

Originally Posted by Boreas

Oh, absolutely! It never would have worked but the Obama Administration and the Democratic caucus should have given it a concerted and sincere effort.... and then screamed bloody murder when it failed. They would have had the people behind them and the 2010 mid-term might have turned out a lot differently.

John

It is rather ironic that the lady who suggested that he bail out the homeowners - Sheila Bair former head of the FDIC iis a Republican.

In truth would not bailing out the homeowners have indirectly bailed out the banks?

[merrylander]

Agree but is this not what Glass Steagal did and perhaps why Elizabeth Warren wants it re-instituted

[Tom Joad]

Originally Posted by merrylander

In truth would not bailing out the homeowners have indirectly bailed out the banks?

Good point. I had never thought of it that way, but of course it would have.

[mpholland]

Originally Posted by Pukka Sahib

Not all of the homeowners caught up in the subprime mortgage debacle would deserve to be “bailed out”; and many, many of them went bankrupt. For example: a man who worked as a janitor for the school district, and never earned more than $35,000.00 per year in his life, managed to buy four homes in California by borrowing more than $2,000,000.00 in subprime loans. On his loan applications (prepared by his loan broker) he stated under penalty of perjury that he owned a janitorial service business and earned over $300,000.00 a year. The homes were purchased as "owner occupied" with 100% financing on adjustable rate notes secured by the property whose value was overstated by inflated appraisals made by the partner of the loan broker; and the mortgages were packaged and sold by the banks as debt securities on the financial markets.

Then when the interest rate on the adjustable mortgages went up and the property values went down, the hapless janitor was facing payments three to four times the amount he earned each month or could collect from renters of the properties; and he defaulted on the note obligations secured by the mortgages that were subsequently foreclosed, some by the lending banks that were obligated to buy back the paper pursuant to repurchase agreements, and others by assignees of the mortgage-backed securities. The "millionaire" janitor, who filed bankruptcy, was an uneducated immigrant from Mexico and claimed that he did not understand the loan documents prepared for his purchase of the four properties; the loan broker claimed that he prepared the applications based on what the borrower told him; and the banks admitted that there was no "due diligence" inquiry as to either the value of the collateral or the borrower’s financial ability to make the payments. One bank officer stated in his FDIC deposition: "He looked pretty good on paper."

And, this was not an isolated case - it was rampant. There was a record number of foreclosures on subprime loans secured by overvalued property on credit bids by the holders of the mortgages. The government regulatory agencies did not exercise proper oversight of mortgage bankers and financial markets; and bailing out the borrowers would only have rewarded the banks for making bad loans.

I still marvel at how that took place. I bought my house right before the downturn and every little morsel that I put down on paper was questioned, verified, and double checked before I was even pre-approved. Had to go through a more thorough process than that for final approval. All this on top of the fact that I had good credit, good debt:income, stable job history, and money in the bank. Guess I sought money from the wrong place, are the right place as shown in the long run.